National Money Mart v 24 Gold - Ontario Superior Court finds that the 2-year Ontario limitation period for a claim for unpaid HST starts running only when the supplier pays that tax

ETA s. 224 provides that a supplier can sue the recipient of a taxable supply for unpaid GST/HST on the supply upon meeting conditions including that the supplier “has accounted for or remitted the tax payable by the recipient in respect of the supply to the Receiver General.” A supplier did not charge HST on a sale of unrefined gold (perhaps being unaware of the distinction between it and refined gold). Later it was audited and assessed for the missing HST, and on payment of the assessment, it sued the purchaser for the tax.

The purchaser argued that the two-year time limitation under the Limitations Act 2002 (Ontario) started running from the time that the supplier should have invoiced the HST on the sales, so that the supplier’s right of action under ETA s. 224 was out of time. In rejecting this argument, Diamond J found that the supplier did not have a right of action under s. 224 until it had been assessed for and paid the HST, so that the two-year limitation period only started running from that point. Thus, the supplier’s s. 224 action had been brought in time.

He also found that the purchaser was not time-barred under ETA s. 225(4) from claiming an input tax credit given that HST had not originally been charged by the supplier.

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